Argentine Industrial Union (UIA) head José Ignacio De Mendiguren once again warned that despite the Brazilian’s real devaluation, the worst-case scenario for Argentina is “that Brazil’s economy stops growing. In any area, the difference is of 4 to 1, so if it stops growing, foreign markets will have it harder, the internal market will shrink and we will be in trouble.”
De Mendiguren doesn’t foresee a crisis in Argentina. “We had crisis when we lacked dollars. After October we will have to upkeep the profitable areas that will allow Argentine savings to be invested in the country. The capital was here because we could get out of the 2002 crisis via self-financing,” De Mendiguren added.
“Brazil has a problem that we don’t have: that of the income of short-term capital, that enter when one doesn’t need them, and answer to financial deals. When there is a crisis, the short term capital incomes leave when most needed,” the business leader said.
«Despite that Brazil’s exports increased by 35 percent, ours did so by 22 percent. A month ago, Brazil implemented measures to improve its competitivity like removing managerial contributions, a 25 percent devaluation regarding foreign companies, which was a measure not to tackle the real problem. In spite of these measures, Brazil started this downslide. If we recall the 2008 crisis, Brazil took the real to 2.5 and when the situation calmed down and the capital flight ended, the real was back at 1.6 I don’t know if this implies a measure like that or is simply a temporary measure.”
“We are following each sector very closely. Our dialogue with the Brazilian public sector is constant and we will soon meet with the private sectors. If there’s a crisis in the region we don’t want to solve one country’s crisis by shoving it to another one. Both countries must face this with rationality.”
The UIA leader stressed that “the exchange rate is a very important factor, although it is not the only one. An economy’s competitivity is more serious than that. One has to be competitive from tax aspect, a financial aspect, the infrastructure and job legislation aspects. We don’t take care of these issues and when we lose competitvity we seek to solve it magically via the exchange rate. When the exchange rate is modified and these problems aren’t solve we are laying out the next devaluation. If we don’t do this, we will never be able to get out of these fluctuating movements,» he concluded.
Source: Buenos Aires Herald